Macroprudential Stress Tests and Policies: Stretching for Robust and Implementable Frameworks

Ron Anderson, Chikako Baba, Jon Danielsson, Udaibir S. Das, Heedon Kang and Miguel Segoviano
Non-supervisory bank stress testing is becoming firmly embedded in the post-crisis macroprudential frameworks of major financial sectors around the world. The Monetary and Capital Markets Department (MCM) of the International Monetary Fund (IMF) and the Systemic Risk Centre (SRC) based at the London School of Economics (LSE) launched a collaborative research program into macroprudential stress testing.
 
The aim is threefold:
(i) present state-of-the-art approaches on macroprudential stress testing focusing on modeling and implementation challenges, including the modeling of systemic risk amplification (SRA);
(ii) provide a roadmap for future research and practical implementations in stress testing, and;
(iii) discuss the potential uses of macroprudential stress tests to support macroprudential policy.

The first version of this report was prepared for the MCM-SRC symposium “Macroprudential Stress Tests and Policies: A Framework,” held at the IMF HQ, Washington, DC, December 15–16, 2016. This final version also reflects the exchange of views at and after the symposium.